Telekom Austria Ag

Thank you, operator, and good morning, everybody. Thanks for joining our call on our results for the first quarter 2025. I'm here with our CEO, Alejandro Plata, and our group CFO, Sonja Wallner. I'm afraid our deputy CEO, Thomas Arnoldner, is not able to join today spontaneously. But as usual, we will guide you through the presentation now and we are happy to take your questions afterwards. Thank you.

Thank you and good morning everyone. Thank you very much for joining our first quarter call. As you can see in the first slide, summaries of this quarter was a pretty solid quarter, I would say, with total revenues going up 3.7%, driven by both service revenues and equipment revenues. Service revenues went up 3.5%, primarily coming from the Central Eastern European markets. with the principal development all over the place there. EBITDA excluding restructuring went up 8.1%, reported 5.2%. We had a plan to do additional restructuring in Q1 to accelerate or to anticipate, let's say, certain market dynamics in Austria where we wanted to manage our costs from the very beginning. We have anticipating or accelerating restructuring in Q1, which will not be continuously done during the rest of the year. During the rest of the year, we will continue as before. And free cash flow going up almost 200% to €150 million. Sonia will give you a little bit more color of the drivers. It's not capex. Capex is almost at the same level Last quarter, everything is mostly operationally driven. On the market environment, we have launched what we call the B2B Digital Services. It's a competent center, a delivery center that we have been working now for a while. a very interesting growth potential in this segment as we had anticipated to you before. So now we have formalized the delivery center. We want to standardize the way that we do delivery of those products and services. I see a very big opportunity ahead of us to address this segment that is usually pretty much underserved. And also, as we also mentioned in Q4 last year, we are focusing a lot in having a stable and slightly growth mobile subscriber base. In Austria, we did manage to achieve in Q1, despite that this pretty competitive market out there and the economy, as you probably know, is pretty weak. But the strategy is working pretty well to get our customer base increasing. postpaid, especially on the high-value segment where our prime brand pays off. And also Belarus, who is always an area of focus for us for obvious reasons, showed very solid operational trends in local currency and in euros, since the currency has been pretty stable, appreciating a little bit, and I think there is room for further appreciation of the currency, of course, all depending on what happens finally with the war and the situation of sanctions and Russia. Our outlook on the revenues remains the same, 2% to 3%. Q1, we drew almost 4%. But I think that as indexation is fading away, we will keep our 2% to 3%. And we have also decided to reduce, as likely, capex by 50 million. We want to be a little bit more conservative on the early parts of the year. We can always adjust if the economy, especially in Austria, gets better, if all this turmoil that we see in the market gets more under control. But what we are planning so far is to decrease capex slightly. This is not going to have any impact on our operational performance. We are postponing projects. We are not canceling anything. We're just postponing certain projects that I don't think that they will have a huge impact. Just to give you some color, we are postponing modernization of HSC networks. You know, we have been working a lot lately to modernize HSC networks into fiber just to remain very competitive. I don't think that there is not going to be any big impact due to that performance. Also some non-strategic projects that we do, some lifecycle management activities that we always do to keep our networks in best shape. So I don't see a huge impact actually on this small decrease from 850 to 800 million. If I move to the next slide, as I mentioned before, you see mobile subscriber development that we are very pleased to see. Total subscribers went up 8.4% in Austria, in IoT and in CE, growing all over the place, basically. And an area of focus, which is post-pain, you see growth in Austria, over 8,000 customers in a very competitive market. I think we're doing very well, especially playing in different segments, high value with A1 brand, low value with a Yes brand. So I think the team is doing a very good job in a, more than a competitive market, in a very weak economy, I would say. And CEE also growing 216,000 postpaid customers. And our IoT business, what you see here is one digit and close to 2 million. So we see very solid performance of mobile in the market. If you go to fix different views here, you see a very strong growth that continues in our CE market with more than 100,000 new broadband customers, 2.6% of the group growth. 100,000 assets in CE, and a decline, of course, in osteo, 33,000, where it's a combination of customers that we are actually losing, especially where the copper has not, we don't have enough speed. But we are migrating a lot of customers to cubes, which I think we need to also, as we did many times before, look at the fixed broadband market as internet at home, because the cubes is a tool that we use more and more, especially to migrate customers where it's very rural, we don't have good copper, and it doesn't make sense for us to bring fiber to those remote areas. On CEE, we see very strong performance, 100,000 new customers in broadband and close to 140,000 TV customers, we see a very good performance of TV, but also we see very good performance of all the OTT products that we sell, especially in CE, like Netflix, SkyShow, Time, and others, that this way to complement the traditional TV services with OTT services is working very well, as you can see in the slide. Now I will hand over to Sonia, who is going to drive us into some more details of our financials for Q1.

Thank you, Alejandro. As you already pointed out, the total revenues and service revenues grew on a group level of 3.7% and 3.5%. And you also see that the growth is driven heavily by the international operations where Austria shows a little bit weaker development and negative development on the revenues. The EBITDA pointed out we reached 478 million euro. That is, without restructuring, we reached 8.1% on a group level. And you see also that the growth of EBITDA is performed very much on the T countries. But Austria, as you see, despite negative development on their revenues, Austria was able to grow on the EBITDA level. As already pointed out, we focused very much on cost activities in Austria and on restructuring as we knew that development would be a little bit more challenging in Austria. Turning the page to the next slide, you see a little bit development of the service revenues. and you see the growth of the service revenues still driven with mobile core and broadband here very much supported by the CE countries. Austria is performing weaker on that point, as well as fixed revenue developments also heavily driven out of Austria. In the interconnection business, the regulation for for the European Union is over now, and the development is only quantity-driven. And now our growth fields, like solution connectivity, where we support our business customers, is driven both on Austria and on the sea market, where Austria is good at the connectivity revenues. The solution is heavily supported by Croatia and Belarus this year. Going to the next page on the graph, where you see the growth, including restructuring, is 8%, 38 million, where we reach 478 million euros. Then you see the first point, equipment budget, that we didn't touch so far. You see that we are heavily investing in our markets to work with our customer base. Then dividing the OPEX blocks that you see, the restructuring is higher as mentioned. The focus was in the first quarter. on the restructuring, but now in the rest of the year, focusing on the already learned and executed restructuring programs that we see. And what is the focus, not only in Austria, but especially in Austria, is that all the other core objects are managed and repurposed that we see and declining objects especially in regards of total workforce costs and also improvements that we see due to leveraging group synergies, especially on the network and the G&A area where we work on that. Going to the next page with the free cash flow. As already mentioned by Alejandro, we were able to achieve 153 million euro in free cash flow. That is nearly an increase of 200%, and it is driven by operational results. a little lower capex but not that much median and a intense improvement of working capital we were able to improve receivables and payables with a little bit of of increase of inventory especially for the russian market and for the bulgarian market where we of equipment. If, yeah, that would be on the side on the financial intent .

Thank you, Sonia. For today, we have only one focus point that I will cover since, unfortunately, Thomas had to excuse himself for today. As you know, we have been working a lot on B2B digital services, or ICP, as we used to call it. And as we presented many times with very strong growth, growing much faster than our core business. And I still see a lot of opportunity here moving forward. So you see on the left side how much this business has been growing from 2021. At the beginning, very much driven by Austria. Then we started to add more and more capabilities in the rest of the countries, and now all countries are growing very nicely. Croatia last year grew 90%, for example. So we see a lot of momentum on this. And that was the reason why last year we started to think how we can standardize more our delivery capabilities, because we started to see that was very much project-based. And if we would manage to standardize our delivery machine better we would be able not to only sell more, but also to do it even more profitable. You know that margins in these areas are basically lower than our core business. So we wanted to also find a way to keep on improving profitability in this area by standardizing and modularizing our offerings. You see basically that two areas are growing pretty quick. One is cloud with 30%. The other one is security with 33%. Most of our focus has been until now on big corporations, big projects. And now we want to basically replicate that success into more the small and medium segment, which I truly believe that is underserved. And as loads are moved to the cloud, we can provide to our customers not only cloud services, but a comprehensive migration strategy so they can seamlessly move all their loads from on-prem solutions to cloud. In cloud, we also reinforce the importance of exoscale. Exoscale is the A1 cloud. It's a solution that we do our own R&D. So it's software developed in-house where we provide to our customers a European cloud infrastructure with a lot of advantages versus the hyperscalers. You can select the point of delivery. You can guarantee that your data never leaves Europe. You can also combine where your loads are distributed, and also we are adding flexible features like more edge compute capabilities so you can have all these cloud compute services closer or even on-prem, so you can have a combination of both. You can have the benefits of the standardization of the cloud while you have the flexibility on where your data is located. At very competitive prices, we have been checking and we are undercutting all the hyperscalers in terms of prices of the main products like virtual servers, for example, or database as a service, or Kubernetes, or all these new products. Moving on to the final slide, as I mentioned before, we keep our guidance after a strong Q1. Revenues in Q1 grew 3.7. We still commit to deliver between 2% to 3% revenue growth for the full year. And on the CapEx, as we said before, we are lowering CapEx slightly from 850 to 800 million to be a little bit more conservative. Since you know that the world is a little bit turbulent and we want to keep certain flexibility, we have been focusing on not cutting projects, just postponing projects that were not that urgent, like modernization of HFC networks, like different functionality on SIP and things like that, that we decided to postpone. What we are not reducing is all the variable capex because we want to keep on focusing on our customers and continue to have positive net ads. So the investment on the customer side will remain as flat.